Shares in Sainsbury’s closed more than 5% lower after the retailer said it was seeking to delay an investigation into its proposed merger with Asda.
The Competition and Markets Authority (CMA) has denied its request for an 11-day extension but Sainsbury’s said it would appeal against the decision.
The move raised fears the £15bn tie-up could be rejected when the regulator gives its final ruling next year.
It is probing whether the deal could harm competition and push up prices.
Sainsbury’s takeover of Asda would create Britain’s largest supermarket group, overtaking Tesco.
In a joint statement on Wednesday, Sainsbury’s and Asda said the current timetable of the investigation did not give the retailers, or the CMA, enough time “given the unprecedented scale and complexity of the case”.
They said they had made repeated requests for extra time after being asked for additional information at short notice.
“We are asking for an additional 11 working days to complete our responses… Without this, we will not be able to respond meaningfully to many of the key issues or have an effective oral hearing,” they said.
Explaining its decision, the CMA said the supermarket groups had been able to put their views forward since April.
It also said it had a legal obligation to complete its investigation in good time to be able to give its final ruling on 5 March 2019.
“If we gave the companies the extra time they are now asking for, it would put our ability to complete the investigation by the required deadline at very serious risk,” a spokeswoman said.
‘Law unto itself’
Neil Wilson, chief market analyst at Markets.com, told the BBC: “I think the CMA is not well disposed to this deal and clearly today’s news is a sign Sainsbury’s and Asda think they’re being hard done by, which suggests they’re running into trouble.
“It’s very hard to see how the CMA can let this deal go through,” he added. “Sainsbury’s is trying a merger with a direct competitor and taking the big four [supermarket groups] down to three, which is something of a tipping point in competition cases.”
But independent retail analyst Nick Bubb said the deal was not necessarily doomed.
He said the fall showed that “the City is nervous that the CMA is being more antagonistic than expected towards the merger. And the share price had been boosted by the view that the merger would eventually be allowed to go ahead without too onerous a level of store disposals”.
“I think it’s just a glitch, but the CMA is a law unto itself and nobody can be sure what it’s thinking.”